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Fri 22 May 2015 08:50 AM

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Saudi business optimism for Q2 prospects falls - survey

Dun & Bradstreet Business Optimism Index shows drop in confidence in both oil and non-oil sectors amid continuing oil price volatility

Saudi business optimism for Q2 prospects falls - survey
(Getty Images - for illustrative purposes only)

Business optimism in Saudi Arabia for prospects in the second quarter of 2015 fell in both the oil and non-oil sectors, according to a new survey.

The Dun & Bradstreet Business Optimism Index (BOI) survey showed that continued volatility in oil markets since the beginning of the year have weighed negatively on optimism.

Oil prices appear to have stabilised in the $45-55 per barrel range, down from last June's peak of $115 per barrel.

The hydrocarbon sector's index score dropped to 13 points, its lowest level since the second quarter of 2009 while the non-hydrocarbon sector's score declined modestly to 43 points, as the government counter-cyclical fiscal policy, supported by its huge reserves offset the expected negative impacts due to the sharp fall in oil prices.

The survey cited the moderating pace of the awarded construction contracts so far this year in the Gulf kingdom for its index score declining by just five points to 44.

It also showed that despite the ongoing war in Yemen and regional uncertainties, about 50 percent of companies did not anticipate it to negatively impact their businesses in Q2.

Reflecting improved confidence over the last quarter in the resilience of the kingdom's economy, 49 percent of the companies surveyed in the non-hydrocarbon sector still plan to invest in expansionary activities, with the sentiment in the finance, real estate, and business services sector taking the lead.

Sharihan Al-Manzalawi, economist of the National Commercial Bank which partners D&B for the survey, said: "The continued volatility in oil markets since the beginning of the year have weighed negatively on the optimism in both the hydrocarbon and anon-hydrocarbon sectors of the second quarter of 2015."

In the hydrocarbon sector, the survey said that despite the expectation of weak selling prices, oil & gas companies are modestly more optimistic about their profitability and hiring outlook compared to the previous quarter.

In the non-oil sector, a drop in optimism for selling prices and profitability is responsible for a weaker forecast than Q1, the survey added.

It said the non-hydrocarbon sector has maintained its hiring outlook, with an index score of 42 in Q2 against 41 in Q1.

Large companies are said to be more bullish than SMEs about the second quarter with composite scores of 47 and 38 respectively. Large companies say they have a stronger outlook for volume of sales, new orders, profitability and hiring, while both groups have a similar forecast with respect to selling prices.